The Grid - Glasgow

The report by Real estate group CBRE shows the latest figures on the office markets in Glasgow and Edinburgh during the Q2 of 2022.

GLASGOW

Take-up for the Glasgow office market totalled 135,155 sq ft in the second quarter of the year, which is up 9.6% from the second quarter of 2021, showing the market continues to recover from the impact of the pandemic.

Total take-up for the year to date stands at 230,651 sq ft, 16.5% up against the same period last year.  Furthermore, Glasgow’s twelve-month rolling average has increased, with 635,685 sq ft transacting in the past year, representing an increase of 61.88% against the previous twelve months.

Glasgow had two deals surpassing the 20,000 sq ft marker in Q2: Ovo Energy taking 33,905 sq ft at the recently complete Cadworks and WIZU letting 24,350 sq ft across three floors at 2 West Regent Street. Furthermore, Diageo agreed to let 12,438 sq ft across two floors at ONYX on Bothwell Street.

Out of the 2.895m sq ft of office space currently available in the Glasgow market, only 134,194 sq ft of it is considered Grade A, representing just 0.59% of all Glasgow office stock.

Positive rental growth in both Grade A and Grade B office markets will be an attractive proposition to investors, and it also highlights just how well Glasgow has recovered post-pandemic as it continues to be a profitable market. £24.1m worth of stock has exchanged so far this year, with further deals under offer and a significant amount of capital expected to transact by the end of the year. Prime net-initial yields for Grade A offices remain attractive at 5.00%.

Martin Speirs, associate director at CBRE Glasgow, said: “We are entering an interesting time in the Glasgow office market with Grade A supply continuing to diminish and demand for best-in-class space remaining.

“Occupiers understand now more than ever the importance of having not only high-quality office space, but space that offers their staff, and their business, the focus on ESG that is being demanded at board level.

“The war for talent is becoming apparent and only with engaging and exciting office space will occupiers succeed in attracting and retaining their best staff, but also, importantly, manage to encourage them back into the workplace.”

EDINBURGH

Office take-up in Edinburgh totalled 87,168 sq ft in the second quarter of 2022, down 45% from the same period in 2021 and down 65% against the Q2 five-year average of 251,458 sq ft. Despite this the total take-up for the year to date is a healthy 206,094 sq ft.

Encouragingly, with 789,275 sq ft worth of occupier requirements in the pipeline, Edinburgh is still in high demand. The flight to quality accommodation also remains within the Capital, with 35% of the space transacted in Q2 classified as Grade A.

Exchange Crescent - Edinburgh

The actual volume of deals remains in line with previously forecasted predictions, and with 13 occupiers within the city regearing over 187,000 sq ft, the city evidently still has appeal. Notable regears included Scottish Ministers’ 89,000 sq ft space at Silvan House and Skyscanner committing its future to Edinburgh’s Quartermile One by extending its lease.

The quarter’s largest deal was at Exchange Crescent, with Dukosi taking 12,000 sq ft. Copenhagen Offshore Partners transacted 5,318 sq ft at the recently completed 10 George Street and Manor Estates has taken 5,073 sq ft at New Mart Place.

So far this year the highest level of activity has been recorded in the sub 5,000 sq ft market, with 56 deals equating to an 85% market share of all 2022 deals within the city.

Stewart Taylor, senior director at CBRE Edinburgh, said: “The recovery of the Edinburgh office market continues with take-up totalling 173,831 sq ft so far this year and a high level of demand remaining for the best possible space.

“The market has also seen an unprecedented level of regears as occupiers delay making a longer term commitment because of both uncertainty over future space needs and the lack of current Grade A availability.

“The flight to quality, a national trend, has been heightened in Edinburgh by sharply diminishing supply and a limited pipeline. With occupiers increasingly focused on employee satisfaction and how the space contributes to their environmental targets, it’s the best buildings that have attracted the strongest interest with reduced focus on rent.

“Occupiers of scale know that to secure the best space they have to move quickly and early. Another factor placing upward pressure on new-build rents are rising build costs which will undoubtedly have an impact across the development pipeline in every market.”